Retirement savings can’t prop up schools

Friday

May 30, 2014 at 12:05 PMMay 30, 2014 at 12:05 PM

By Charlie Breitrosewatertown@wickedlocal.com

On Tuesday, Town Councilors examined the town’s retirement fund at the same time that they struggled to find a way to fund a major increase in the Watertown School budget. After some discussion, it appears that the retirement funding will not provide the needed boost to school funding.The schools will receive $2.267 million, or 6.18 percent, more than the Fiscal 2014, under Town Manager Michael Driscoll’s budget proposal. School Superintendent Jean Fitzgerald said that the district needs $6 million more - a 16.81 percent increase - to provide a quality education.In his budget presentation on April 29, Driscoll described a pay-down of the unfunded portion of the Watertown Contributory Retirement System - which stood at about $53 million at the beginning of 2014. Watertown had planned to pay $10.6 million a year until 2022 to pay off the unfunded part of the town retirement benefits. Under a new plan adopted last year Watertown will pay an additional $1.575 million toward funding retirement benefits from Fiscal 2015 to 2018 (plus $771,665 in Fiscal 2019) pay off the unfunded portion.The payments ramp up from $10.6 million in Fiscal 2014 to $17.7 million in 2019. After that, the town’s payment into retirement benefits will drop to about $2 million a year, said Town Auditor Tom Tracy. This would result in $32 million in savings from Fiscal 2020-22, Driscoll said.Many wanting to bolster the school budget looked at this figure as a potential source of money.Tracy, a member of the Retirement Board, explained that the money is not sitting in the town’s coffers available to be spent. The plan to fully fund the retirement benefits was adopted by the Retirement Board last year after a request from the Town Council."By adopting the funding scheduled it will be fully funded by 2019,"Tracy said. "It will result in $32 million in savings."Councilor Aaron Dushku asked if the payoff plan could be pared down, possibly freeing up the money for the schools or other needs in town. He compared to paying off his mortgage."I would love to pay off my mortgage, but I have other bills to pay and expenses,"Dushku said.Tracy said the plan adopted by the Retirement Board was approved by PERAC (Public Employees Retirement Administration Commission), and the next time it could be taken up is for Fiscal 2016.With that in mind, Councilor Susan Falkoff asked if any of the money could be moved away from funding retirement this year without running afoul of the plan adopted by the Retirement Board. Tracy said $250,000 could be moved.While some talked about looking for ways to fund schools, Ronald Dean, the Chairman and CEO of Watertown Savings Bank, said that he believes paying off unfunded retirement benefits is one of the most important things a town can do."In the financial world it is a big deal," Dean said. "Other towns are burying their heads in the sand. Get rid of the mortgage. You shouldn’t have mortgages. (Retirement benefits) should be 100 percent funded."Councilor Vincent Piccirilli said funding the retirement would help with the town’s budgets down the line. With the town paying down the liability, fewer town dollars will be taken away from other areas to pay off the retirement liability."It’s easy to balance a budget in one year, but you have to discipline to have a budget that is sustainable for 10 years,"Piccirilli said.Town Council President Mark Sideris, too, supported paying down the unfunded liability."Personally I think it is important for the community. And it is important for retirees,"Sideris said. "The $32 million (in savings) is real. You can take the money and do something with it. I want to pay the money down and the Town of Watertown is able to do that."